Supreme Court nominee Judge Samuel A. Alito, Jr. was part of a Third Circuit Panel that just issued a unanimous opinion in the Merck securities class action. The decision, which focuses on materiality, shoots Plaintiffs down, noting that Lead Plaintiff "is trying to have it both ways: the market understood all the good things that Merck said about its revenue but was not smart enough to understand the co-payment disclosure," but alas, "an efficient market for good news is an efficient market for bad news."
Interestingly, the Panel spends about half of the opinion discussing whether the Lead Plaintiff, Union Investments Privatfonds GmbH, was acting within its authority to unilaterally replace Bernstein Litowitz with Milberg Weiss after losing the motion to dismiss before Judge Stanley R. Chesler (D. N.J.). The Panel held that "all retentions of class counsel by the lead plaintiff--whether lead counsel, trial counsel, or appellate counsel--require court approval under the PSLRA, but that "Milberg Weiss may prosecute this appeal," although "future lead plaintiffs must obtain court approval for any new counsel."
You can read In re Merck, issued December 15, 2005, here, or at 2005 U.S. App. LEXIS 27412.
Nugget: "Sunshine is a fine disinfectant, and Merck tried for too long to stay in the shade. The facts were disclosed, though, and it is simply too much for us to say that every analyst following Merck, one of the largest companies in the world, was in the dark."